The US economy is in a slowdown. This may or may not turn into a recession. Previous slowdowns in 2012 and 2015 and did not turn onto a recession and proved to be buying opportunities.
The cyclical downturn started before the trade war in both the US and China. The trade war is not the cause, just the icing on the cake. We can get a cyclical upturn without a resolution to the trade war.
Both the US and China will do everything possible to avoid a recession. Trump to avoid losing the election. And Xi to avoid a revolution. Whether the Fed's cutting rates and China's stimulus (for the n-th time) is enough remains to be seen.
No resolution to the trade war. The differences between China and the US are too big and cannot be negotiated. This is a cold war. Longer term, US companies will disengage from China, and there will be two parallel, seperate supply chains.
Long term:
- I think China's economy will not implode, but will drift downwards as they restructure. Whenever it looks like it is about to collapse, they will pause restructuring and stimulate. Stop-start, stop-start. A glide slope.
- The Eurozone will a probably break up. Countries so different should not have a common currency.
- Theres a small chance of the USD shooting up due to their shortage. Probably accompanied by emerging market crisis.
Things I think the market is not pricing in now:
- Oil price recovery
- For HK/China stocks, a cyclical upturn due to Chinese stimulus.
- Bank stocks (both SG and US) are low, due to the expectations of low rates foreverrrr..... If this changes, lets say 6-18 months out, like it did in 2016 after Trump's election, bank shares are worth a look.
- A crash, due to the market being too high combined with political risk, maybe exacerbated by systematic traders.
In general, markets are high now, I would not buy into "the market" (the indexes).
I am looking at REITS and dividend stocks, but there's not much out there thats reasonably priced.
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